Description

Toka Tindung is about 35 km north east of Manado, the capital of the Indonesian Province of North Sulawesi. The project entails the development of six open-pit gold mines in a biodiversity hotspot and in close proximity to several nature conservation areas, both on land (Tangkoko Jungle Reserve) and in the sea (Muck Diving Critter Haven Lembeh Strait).

Although local people, the Provincial Parliament and – in the past - the Governor of North Sulawesi have all said “No” to Toka Tindung, the London-AIM market registered mining company, Archipelago Resources, nonetheless forced the development of the mine manipulating Indonesian law and bribing Government Authorities to approve the previously denied EIA.

The Local Peoples Alliance AMMALTA is filing a law suit now to have the approval cancelled.

Brief history

Archipelago Resources (AR) took over the Toka Tindung mining concession from Aurora Gold in 2002. The contract of work with the government of the Republic of Indonesia it acquired, was still granted by the Orde Baru government of Soeharto. This contract of work was issued on November 6th 1986, 11 days before the company MSM (a subsidiary of AR) even was formed on November 17th 1986, which means the contract is a product of collusion.

AR first tried to embark on the old EIA held by Aurora (Indonesian language: AMDAL) dated June 14, 1998, which was declared suitable to be not revised or renewed by former North Sulawesi provincial governor A.J. Sondakh. This masterpiece of bribery didn't work out though.

In the course of a broad resistance of the coastal population against the planned disposal of tailings into the sea and a visit of a delegation of the local Alliance against the disposal of tailings (Alliansi Masyarakat Menolak Limbah Tambang - AMMALTA) to several ministries in November 2005, finally the Ministry for Environment (Kementerian Lingkungan Hidup - KLH) declared the EIA held by MSM outdated and not valid any more on the grounds that it was not used for more than three years since its date of issue, and because production figures changed from 1 million tons tailings per year to 1.25 million tons per year. In a letter to MSM and the provincial governor the ministry asked the company to temporarily
stop all construction activities until the legal situation was clear and a new EIA produced that will suggest an environmental tolerable way of tailings disposal.

As a reaction the governor of the province of North Sulawesi, asked the Ministry of Energy and Mineral Ressources (ESDM) to withdraw its permit which it had given to MSM, because of the enviromental and health risks of the proposed submarine disposal of tailings as well as the risk of social unrest (resistance against the mine). This didn’t happen though.

The company then switched its plans to a Tailings Storage Facility (TSF) on land, but governor Sarundajang rejected the EIA approval too.

Among his reasons were:

Toka Tindung gold mine "IS NOT IN ACCORDANCE WITH THE REGIONAL PLANNING SCHEMES.” This is also mentioned in the letter dated December 5th 2005 issued by the Ministry Of Environment which tells “ if activities are not in accordance with the regional planning schemes the EIA can’t be processed”.

Social unrest is to be expected, as coastal people vigorously reject the gold mine.

The mining operation can’t guarantee the health of the people and the environment.
Despite this in March 2008 the ESDM – violating valid law - extended the construction permit granted to AR although it doesn’t hold an EIA.

After months of AR’s share values deteriorating on the AIM during March 2008 and July 2009 the shareholder majority shifted from Baker Steel into the hands of Indonesian Rajawali Corporation.

New player, ethnic Manadonese Peter Sondakh, and founder of the Rajawali Corporation, emerged as the savior for AR as he managed to play his political influence in a way that the North Sulawesi Regional Planning Scheme was manipulated in Jakarta to accomodate mining again in the two relevant regencies, North Minahasa and Bitung. He persuaded the governor to leave his former strong stand and allow the EIA to be processed after an ad hoc university "research" had been “conducted” by UNIMA stating there’s no more social resistance. Under Sondakh’s influence on the central level in Jakarta finally Environmental Minister Witoelar during his final days in office on October 5, 2009 issued a letter approving the EIA submitted by MSM and TTN.

Coastal peoples alliance AMMALTA filed a lawsuit against the minister in December 2009 asking for the approval to be cancelled as it violates several government regulations. The law suit is being processed and first results are to be expected soon.

As all previous banks and project finance syndicates by mid 2008
(except ANZ) had pulled out and didn’t provide working capital for the
Toka Tindung gold mine, new capital was raised issuing additional shares
which by mid 2009 featured Indonesian Rajawali Corporation as a
majority shareholder.

The company in January 2010 signed a letter of intent with a new
syndicate comprising BNP Paribas S.A., Standard Bank PLC and ANZ Banking
Group Ltd. to finance the Toka Tindung gold project. Each bank was now
complete a process of due diligence necessary to obtain credit
committee approval targeted for early 2010. Still, in March 2010 the company decided to raise the capital needed by placing share, which meant the end of the banking syndicate.

What must happen

The new remaining financiers of Archipelago Resources (ANZ, BNP Paribas, and Standard Bank) must immediately stop the current due dilligence process and withdraw for the project (February 2010).

The direct shareholders of Archipelago Resources, such as JPMorgan Chase, Prudential Financial and AXA, should divest of the company.

Location

Issues

Social impact

MSM/TTN are strongly deemed to have deliberately created horizontal conflicts among the local people and in communal institutions like schools and churches by creating the image that the ones who resist the company destroy the working opportunities and livelihoods of many, as if the communities were deperately dependent on job opportunities granted by the company and will fall into poverty without. The coastal population was stirred up by glorious work promises, and rumors of a splendid future for the villages that support the mine and on the other hand by intimidations against the ones that showed resistance. The village chiefs were called into conspiracy meetings, generously paid and their families employed as workforce, as long as they supported the mine by suppressing adversary village people and issuing support letters which never passed any village meeting but were made in the name of the village.

MSM/TTN are known to have actively interfered in local village head elections by handing out money to voters. MSM/TTN have purposefully misused the religion by having community services organized in the villages of the surrounding area in June 2006 as part of their ADMAL socialization. They secularly intimidated the villagers having priests telling them that the government was the true minister of god and the government had accepted MSM, thus refusing MSM was a sin against god himself and would receive severe punishment.

As Toka Tindung is located in a densely populated area it endangers directly the villages in its immediate surroundings to be contaminated. A possible overspill of fine tailings mud presents a real danger to the bay of Rinondoran which is the heart of the local fishing industry. Having buit – illegally- a company jetty at Pasar Rinondoran, fishing traffic and fishing results are hampered.

As North Sulawesi’s main economic pillars are tourism, fishery and agriculture, all three viable sectors will suffer severe damage and many thousands of jobs are going to be lost if Toka Tindung goes into production giving a few hundred people jobs for a period of a company – projected mine life of maximum eight years.

The destruction of a healthy environment and the very livelihood of thousands of peole will cause a man made sudden poverty in this rich province of North Sulawesi.

Environment

The island of Sulawesi is located in the bioregion of Wallacea, which separates the zoogeographical regions of Asia and Australia. This area harbors some of the most biodiverse, unique, and most fragile ecosystems in the world. North Sulawesi’s Bunaken marine National Park and Lembeh Strait known for its critters both attract tourists from around the world. The area between soft coral paradise Bangka and muck diving haven Lembeh Strait has been nominated for World Heritage status. The nature reserves of Tangkoko and Dua Saudara, which are directly adjacent to the mining area, are home to many endangered mammal, bird and reptile species.

Archipelago will extract the gold at Toka Tindung using cyanide lye, which is feared to infiltrate the groundwater, and there are grave concerns regarding the storage of tailings as the concession area is known for its frequent earthquakes and volcanic activity. It can therefore not be guaranteed that toxic waste will not enter the ecosystem, especially in a business environment as corrupt and inefficient as Indonesia’s.

The project will also have a devastating impact on local water supplies, as the goldmine will use large amounts of water (on average, 104 litres of water are needed to produce 1 gram of gold) and will leave a deep hole far below the groundwater table, causing substantial drawdown. This would severely impact drinking water supplies and local agriculture. Lastly, the heavy increase in sea traffic caused by the goldmine project threatens fish stocks and the spectacular marine wildlife in the Strait of Lembeh. The mining operation has therefore met with widespread resistance both from local inhabitants and the Provincial Government, who fear that the mines would disrupt the ecology and the economy of the region, which is based on fishing, agriculture and tourism.

The illegal construction activities of MSM in the Toka Tindung area of East Likupang’s district between the years 2003 and 2006, modeling the landscape without EIA, on March 11th 2007 most probably caused a mud flood which was unseen before in the area. It forced 400 villagers of Rinondoran and vicinity to flee their houses which were buried under fine mud of 1 – 1.5 meters strength and turned the crystal clear ocean into a stinky mud pool. There were also hundreds of dead fish swept ashore.

Human rights

In July 2006 several thousand fishing and farming people associated in the coastal peoples alliance AMMALTA had staged a peaceful mass demonstration from Bitung harbor via Airmadidi, the regency’s capital, to the provincial capital Manado demanding that the Australian company cancels the gold mine and leaves North Sulawesi. As a result, the company’s original plan of submarine disposal of tailings (STD) was modified into the Tailing Storage Facility on land (TSF), although the area is prone to yearly floods and earthquakes and thus this solution is far from safe for man and environment. On their way home one truck with peaceful demonstrators was attacked out of the back by men known to belong to MSMs security forces. Several demonstrators suffered severe head injuries and a woman pregnant seven months had a miscarriage. The case was never properly investigated, as vice governor Freddy Sualang is cited in KOMENTAR October 4, 2006 edition “it cannot be that people who peacefully demonstrate their aspirations are terrorized”.

In November 2006, hundreds of fishermen staged a blockade in the bay of Rinondoran in order to protect their fishing rights as the company had – illegally – built a company jetty to land mining material. The case was reported to the National Human Rights Commission in Jakarta.
MSM and TTN violated the land rights of traditional landowners when annexing huge amounts of land in the villages Pinenek/North Minahasa and Pinasungkulan/ North Bitung. Several cases of traditional landowners who filed law suits against the company since 2003 are still pending and are seriously looked into by the Provincial Parliament. One case which the Indonesian High Court decided in favor of the traditional owner was manipulated by MSM on the regional level.

Manipulating Indonesian law enforcement and bribing authorities the company violates the human rights of the People Of North Sulawesi: the central government in Jakarta rejected the original North Sulawesi Geographical Usage Plan as submitted by the provincial government of North Sulawesi in 2008 mapping the regions as agriculture and tourism development zones and instead pointed the regencies North Minahasa and Bitung as mining areas. This change was very obviously made due to the interference of the proposed gold mining operation Toka Tindung owned by MSM and TTN which before had been rejected by the North Sulawesi government and the people in the province. In the direct cause the Ministry For Energy And Mineral Resources (ESDM) readily issued the mining permit, although – according to law – both companies then had not been granted a valid EIA yet – a pre-condition to be granted operation permits.

Other issues

Approving the Company’s EIA in October 2009 must be seen as a supremative act by the central government which counteracts and denies all previous efforts of the government of North Sulawesi to turn the province into a green province, establishing an environmentally friendly and sustainable economy and focussing on long term, non–destructive industries for the future. The viable and healthy prime sectors of the North Sulawesi economy which are fishing/ocean, tourism and agriculture might suffer severe damage to even the point of destruction as a result of the short–sighted central government interference. It not only violates the principles of provincial autonomy, but also turns the image of North Sulawesi in the international world into a caricature, as North Sulawesi had earned international reputation by successfully conducting two international events in 2009, i.e. the World Ocean Conference (WOC) and Sail Bunaken. The World Ocean Declaration (MOC) which was yielded as a result of the WOC under the new circumstances has no relevance any more, although it was meant as a strong signal for the environmental concern of the Indonesian nation and North Sulawesi Province to present itself in the world.

Governance

Applicable regulations

Updates

Latest update

2010-05-20 00:00:00

In May 2010, the lawsuit AMMALTA filed against the Indonesian Ministry For Environment in December 2009 has entered the stage of hearing the witnesses. The court examined the written documents and found a forged document among the EIA (Environment Impact Assessment) documents handed in by the Ministry For Environment and PT Meares Soputan Mining (PT MSM) and PT Tambang Tondano Nusajaya (PT TTN). This proves that the EIA was issued on grounds of manipulated documents.

Among the EIA documents the report of the EIA evaluation commission dated 27 September 2006 was purposefully annihilated. The missing report reveals several law violations which were committed by MSM and TTN during the process of completing the EIA requirements, thus the EIA should not have been issued based on grounds of these findings reported by the EIA evaluation commission.

Among the violations are that the EIA submitted doesn’t comply with the provincial long term development plan (RTRW). It also doesn't include a technical advisor team nor does it include a team of the health department as is required. AMMALTA is convinced that it will win the case, that is if the judges are not bribed and act objectively as stated in their code of ethics.

Early 2010, Archipelago announced it had arranged a placing of shares to raise £30,6 million. The placing was oversubscribed and the proceeds are estimated to provide up to approximately 80% of the funds required to complete construction of the Project. As a result the company still needs to raise only £7 million for construction costs.

Early 2010, Archipelago announced it had arranged a placing of shares to
raise £30,6 million. The placing was oversubscribed and the proceeds
are estimated to provide up to approximately 80% of the funds required
to complete construction of the Project. As a result the company still
needs to raise only £7 million for construction costs. FOR AN OVERVIEW OF THE INSTITUTIONAL AND PRIVATE INVESTORS IN ARCHIPELAGO RESOURCES CLICK HERE.

Credit Suisse:At the end of July 2008, Archipelago resources announced that: "On 15th July 2008 the Company reached agreement with Credit Suisse, Singapore Branch ("Credit Suisse") to provide a conditional US$48m loan facility for development of the Project. The Company started working with Credit Suisse to finalise the legal and other commercial arrangements necessary to facilitate the drawdown under the Loan Facility.

On August 1, 2008, Credit Suisse received a letter from the Governor of North Sulawesi, clarifying that he had not approved the project and that he has no intentions to do so. He added: "(Y)our bank's involvement in this controversial project would have the potential to severely damage the good name of Credit Suisse in Indonesia and beyond."

Mid August 2008 Credit Suisse clarified in a conversation with Berne Declaration that contrary to Archipelagos communication, the project had not been approved yet. Credit Suisse would only provide the loan if Toka Tindung received all the permits (including from the environment ministry and from the Governor of South Sulawesi). In addition the project would have to pass the "Reputational Risk Committee" of Credit Suisse.